New York City Q3 2015 Economic Update

While news from the City’s comptroller’s office was relatively upbeat, the picture of New York City’s economy was not all positive. Workers continued to leave the labor force, with the decline in the number of unemployed workers exceeding the increase in the number of employed residents. Office-using employment growth across the five boroughs was tepid (with jobs in the information and professional and business services sector decreasing) and even some “positives” could be seen as negatives.

Venture capital flows to the New York metro area were up on a dollar basis, but the fraction of total dollars invested in the region was down; GDP growth for the city was higher than that for the country as a whole, but growth still showed the smallest increase in a year, and the strength of the dollar appeared to weigh on tourism.

Here are some take-aways from today’s release:

The good:

New York City’s economy still managed to outperform the nation’s in Q3 2015.

Venture capital investment (as measured by dollars) had the best third quarter since 2000.

The City’s unemployment rate was the lowest in seven years. Manhattan had the lowest unemployment rate (not seasonally adjusted) at 4.5%. (Note that the unemployment rate is based on where workers live.)

The employment-to-population ratio of 57.6% remained at a record high (the same figure for the U.S.: 59.3%). The gap between the employment-to-population ratio in NYC and the US is at a record low.

NYC personal income taxes withheld from paychecks rose 7.9 percent to about $1.7 billion in 3Q15, the highest third quarter level on record. Estimated tax payments, which reflect trends in taxpayers’ non-wage income (including interest earned, rental income, and capital gains) rose to $510 million in 3Q15, 13.7% higher than in Q3 14.

The Manhattan office vacancy rate fell to 8.9% in Q3 15, the lowest third quarter since 2008 (data according to Cushman & Wakefield.)

Strong tourism was reflected in the high hotel occupancy rate hotel occupancy rate in Manhattan, which averaged 92.6% in July-August of 2015, the second highest July-August average since 1980 (but lower than last year.)

Average hourly earnings of the city’s total private employees, another proxy for personal income, rose 3.8% in Q3 15 YoY, after rising 2.9% in Q2 15.

The number of residential sales in Manhattan rose to 3,654 in Q3 15, an increase of 9.8% from Q3 14, while the listing inventory fell 3.0% to 5,654 during the same period. Reflecting the tighter market, the average sales price rose 3.1% to over $1.7 million, while the average price per square foot rose 17.9% to $1,497 and the median sales price rose 9.9% to $998,000.

The bad:

Real gross city product (GCP) grew at an estimated annual rate of 2.4 percent in 3Q15, the slowest growth in over a year.

The metro area’s share of venture capital fell from 16.7% in Q3 2014 to 11% in Q3 2015.

NYC (not just Manhattan) lost (a small number) of jobs in the information and professional and business services.

Less than 5% of all the jobs created in Q3 2015 were in “high-wage” industries (defined as those jobs paying over $112,000 on average.)

Part of the decline in the unemployment rate was due to the decline in the city’s labor force, which fell by a record 33,300. The city’s labor-force-participation rate (LFPR), which is the total number of city residents employed or looking for a job as a portion of the total non-institutional population (16 years old and over), fell to 60.8 percent in 3Q15 from 61.5 percent in 2Q15. (In the US, this figure is 62.4%).

NYC transit (measured by average weekday ridership by bus and subway) was down in Q3 2015 vs. Q3 2014 (-1.6%). More telecommuting? More taxi rides? (Uber?)

The average daily hotel room rate also fell on a year-over-year basis to $260 in July-August 2015, compared to $266 in July-August 2014. The stronger dollar may have kept visitors at bay, but there was also an increase in the number of hotel rooms.